Monster Beverage's Growth Prospects Underappreciated, Morgan Stanley Says In Upgrade

Investors are underappreciating energy beverage maker Monster Beverage Corp's MNST growth outlook, and this makes the stock attractive, according to Morgan Stanley.

The Monster Beverage Analyst: Dara Mohsenian upgraded Monster Beverage from Equal-weight to Overweight with a price target lifted from $87 to $90.

The Monster Beverage Thesis: The energy drink category has shown signs of improvement in the third quarter, and Monster's U.S. sales are "rebounding solidly," Mohsenian said in a Tuesday upgrade note.

Monster's sales were tracking higher by 7.1% in the third quarter and up 9.4% in the first half of October, the analyst said 

Related Link: 4 Reasons Why This Monster Beverage Analyst Raised Their Price Target

This represents outsized growth versus Morgan Stanley's 6.5% long-term U.S. topline growth forecast and could reinforce sustainable momentum, he said. 

Monster also has the potential to generate incremental sales from a "strong" potential innovation pipeline, including a hard seltzer launch in the U.S., Mohsenian said.

Outside of the U.S., Monster is on track to show 18% long-term topline growth based on the following, the analyst said:

A typically strong energy drink category that has shown 10 years of consistent growth.

Continued market share gains in key markets.
The potential to close the market share gap with rival Red Bull.

Finally, Monster's stock is now trading at a one standard deviation discount versus its historical 33.5 times NTM P/E average and nearly two standard deviations below its multiple versus high-growth consumer packaged goods peers and the S&P 500 index, according to Morgan Stanley. 

MNST Price Action: Shares of Monster Beverage were trading 2.2% higher at $79.64 at last check Tuesday.